China’s first industrial leases are expiring. Will their holders renew?

As China’s initial group of industrial leases lapses, questions abound over the ease of renewal and whether foreign investors will recommit

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Published: 6:00am, 1 Oct 2024Updated: 9:15am, 2 Oct 2024

It was 1995, and the Coca-Cola Company was eager – thirsty, one might say – to expand its already substantial presence in China.

Urban incomes and gross domestic product were exploding, and cola sales along with them. Eye-popping figures – like the 76 per cent spike recorded in 1994 – were enough to motivate the company to form a joint venture with conglomerate Swire. The two agreed to manage the Coca-Cola business in southern China, including a mammoth bottling plant in Guangzhou.

At the time of its construction in 1983, the Huangpu district factory – the mainland’s second – was in a relatively remote corner of the city. But in the intervening years, the bustling urban centre had widened, eventually reaching the facility’s parcel. This presented a problem: a sprawling industrial site occupying prime real estate.

To resolve the conundrum, fulfil its expansion plans and extend its tenure in what is now one of its largest markets, Swire Guangdong Coca-Cola recently secured a 50-year lease for a larger tract in the same district. Signed for around 166 million yuan (US$23.6 million), the deal guarantees a total land area of 128,000 square metres for the new campus.

This latest acquisition – a vote of confidence in the country’s prospects – comes as many contracts for commercial and industrial land, secured in the early days of China’s reform period, are approaching their end.

In China, the maximum length for single leases of commercial and industrial land are 40 and 50 years respectively, while residential leases carry a 70-year term.